Working with a variety of formats/codecs/frames sizes/etc in one timeline

Good Afternoon,

As an editor for an ad agency I am being tasked with cutting a demo reel together. Nothing too difficult.

The reel is to include video footage of past projects, going back a couple years or so. The footage that I will be given will undoubtably be in a variety of formats, codecs, frame sizes, frame rates, etc (all SD, though). Delivery is SD DVD.

My question is this:

What is the best way to set up my timeline for a barrage of clips with differing specs?

Do I encode all the media assets FIRST to conform to my Sequence Settings? Or do I just deal with the large amounts of timeline rendering as I work with different formats and codecs? Or do I....?

I am running FCP 5.1.4, so I don't have the Open Timeline feature going for me.

I appreciate any advice and tips you can offer!

Thanks!